SRCE
1st Source Corporation
$87.16
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 36.8% below fair value
You pay
$87.16
Bear
$88.65
Fair
$138.01
Bull
$167.63
Bear
$88.65
+1.7%
ROTCE 10.0% → 1.79x TBV
Fair
$138.01
+58.3%
ROTCE 13.3% → 2.79x TBV
Bull
$167.63
+92.3%
ROTCE 15.3% → 3.39x TBV
Adjust Assumptions
13.3%
7.3%
Key Value Driver
ROTCE (13.3%) vs. cost of equity (7.3%)
Implied Market Multiple
1.76x
Summary
With ROTCE of 13.3% vs. 7.3% cost of equity, fair P/TBV is 2.79x on $49.49 tangible book, implying $138.01 per share. DDM cross-check: $143.83.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly